Gold suffers three session loss of almost 4%

SAN FRANCISCO (MarketWatch) — Gold prices on Tuesday tallied a three session loss of almost 4% as traders of the precious metal grappled with the possibility of a reduction in U.S. monetary stimulus, but worries about the U.S. budget and debt ceiling helped prices finish off the day’s lows.

December gold
US:GCZ3
shed $10.70, or 0.8%, to settle at $1,316.30 an ounce on the Comex division of the New York Mercantile Exchange after touching a low under $1,306. Including Tuesday’s action, prices have tallied a three-session loss of 3.9%.

Advisers remain cautious on money-market funds

(2:27)

Many financial advisers learned to be cautious about money funds in 2008, and have remained so. They're likely to remain cautious at least until rates rise and they're paid to take on more risk.

Gold modestly pared some of its losses shortly after data Tuesday showed that the U.S. consumer confidence index fell to 79.7 in September from a revised 81.8 in August. MarketWatch-polled economists expected the index to drop to 79.5.

But “amid a lack of major geopolitical developments or markets-moving economic data the past several days, the world market place continues to buzz about last week’s decision by the U.S. Federal Reserve to not ‘taper’ its monthly bond-buying program-and when might the Fed begin that endeavor,” said Jim Wyckoff, senior analyst at Kitco.com.

The December gold contract on Monday fell $5.50, or 0.4%, unable to find relief after Atlanta Fed President Dennis Lockhart and New York Fed President William Dudley offered downbeat views about the pace of U.S. economic recovery.

Separately, prominent economist Nouriel Roubini on Monday said tail risks for the global economy have declined, which in turn has hurt demand for a metal often seen as a safe haven.

The Fed comments underscored the central bank’s decision last week to keep buying $85 billion in securities each month because the economy wasn’t strong enough to handle a reduction in monetary stimulus. Analysts have said gold prices benefitted from the Fed’s stimulus measures.

“It appears that the pendulum maybe swinging too far to the downside now as various Fed participants give their personal views,” said Michael Haynes, chief executive officer at online precious-metals dealer APMEX Inc.

“We still may be several months away from tapering and even then, tapering is going to be modest,” he said. “Overall, there is still a huge amount on the Fed balance sheet that no one really knows how the position is going to be relieved.”

Still, “physical gold buyers are seeing the current dip as an opportunistic entry point given the uncertainty of the U.S. budget and debt limit issues and the long-term impact these factors have on the U.S. economy,” said Haynes.

Gold futures had rallied on Thursday after the Fed held stimulus measures intact, but reversed course Friday after St. Louis Fed President James Bullard told Bloomberg Television that a small tapering of bond purchases is “possible” in October.

The foreign-exchange and bond markets reacted to that tapering assessment much more calmly than the gold market “where market players are clearly more sensitive,” wrote analysts at Commerzbank on Monday. “This is evident from the fact that speculative net long positions fell by a further 10,000 contracts in the week before the last Fed meeting and gold [exchange-traded funds] saw renewed outflows of 2 tons last Friday.”

Jason Rotman, president of Lido Isle Advisors, said that while gold still remains above its key support level of $1,300 an ounce, he would not be surprised to see gold “lose some luster soon and head to our next support level of $1,265.”

“We believe the main reason of owning gold (U.S. Fed stimulus) is losing importance and that the safe-haven asset of the moment looks to be U.S. bonds,” he said. Treasury prices climbed Tuesday after consumer-confidence and housing data showed waning optimism about economic growth.

On Comex Tuesday, December silver
US:SIZ3
fell 27 cents, or 1.2%, to $21.59 an ounce, and copper for December delivery
US:HGZ3
lost 4 cents, or 1.3%, to $3.26 a pound.

December palladium
US:PAZ3
tacked on $2.05, or 0.3%, to end at $720 an ounce after earlier declines. October platinum
US:PLV3
finished flat at $1,425.90 an ounce though much of the trading volume is shifting to the January 2014 contract
US:PLF4
which also saw prices close unchanged at $1,429.20.

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